Federal regulators seize 2 troubled Md. thrifts

April 27, 1991|By Peter H. Frank

John Hanson Savings Bank FSB, the state's fifth-largest savings and loan, and the smaller Augusta Federal Savings Bank in Baltimore were taken over yesterday by federal regulators who found the thrifts to be operating "in an unsafe and unsound condition."

The two institutions, with a combined $1 billion in assets, will retain their federal deposit insurance and will remain open and operating as newly formed institutions, according to the Resolution Trust Corp., the federal agency charged with selling or closing the nation's troubled thrifts.

While yesterday's action represented the ninth and 10th time in the past two years that one of the state's thrifts had been placed under federal receivership, Maryland's thrift industry has been spared much direct involvement in the nation's current savings and loan crisis.

"There's virtually no comparison [in Maryland] to the numbers we've seen in Texas or the extent of the industry in Arizona, where they didn't have many savings institutions and we ended up with most of them," said Stephen J. Katsanos, a spokesman for the RTC.

Indeed, not counting the state's own thrift crisis in 1985, Maryland's problems have been dwarfed by the debacle taking place throughout much of the rest of the country.

The RTC, which was created in August 1989 to deal with an expected 400 or so failing institutions by August 1992, has sold 375 thrifts so far and is conservator for another 219, Mr. Katsanos said.

The agency, which has been forced to revise its estimates a number of times, now projects it will be forced to deal with at least 1,000 failed thrifts by the end of next year, with a total cost to taxpayers of more than $200 billion.

Yesterday's takeover of John Hanson was the largest such move in Maryland since early 1989, when the $1.6 billion Baltimore Federal Financial FSA was seized by federal regulators.

Much of Baltimore Federal was later sold to Household Bank FSB in a resolution that cost taxpayers an estimated $323 million.

For John Hanson, yesterday's action caps years of financial difficulties caused by "poor investment decisions by former management," including high-risk commercial real estate loans and costly investment activities prior to 1989, according to the Office of Thrift Supervision, the federal agency that regulates the nation's thrifts.

After losing $16.2 million during its latest two fiscal years, the thrift's parent, John Hanson Bancorp, said it suffered an additional $22.3 million loss during the first three months of this year, completely eroding all of the stockholders' equity in the parent company.

The future of the thrift became particularly bleak last week whenJohn Hanson Bancorp was unable to raise $10 million in additional funds it needed to comply with an earlier regulatory agreement.

Failing to meet that deadline, John Hanson Bancorp was placed under strict operating supervision in what was evidently a prelude to yesterday's more severe action.

Stock in the parent company, whose primary asset is the savings and loan, closed yesterday before the announcement of the seizure at 18 3/4 cents a share, up 6 1/4 cents. It traded on the over-the-counter market.

John Hanson, with 15 branches, had about $846 million in assets and $825 million in liabilities, the RTC said.

The Beltsville-based savings and loan has been reorganized as f fTC federal mutual association called John Hanson Federal Savings Bank.

Customers of John Hanson, who have about $672 million in 73,839 deposit accounts, will continue to be protected by federal deposit insurance, the RTC said. It was not clear yesterday how many accounts were above the $100,000 insurance level.

At Augusta Federal, which was reorganized into Augusta Federal Savings Association, regulators said the institution had depleted all of its capital after suffering large losses in its consumer-lending portfolio, primarily tied to automobile and boat loans.

The thrift had been ordered by regulators a year ago to restrict its new lending to residential real estate.

Augusta Federal, which has eight branches in the Baltimore area, had $157.1 million in assets and $160.7 million in liabilities, the RTC said. The $136.3 million in 18,192 deposit accounts at Augusta Federal would continue to be federally insured up to the $100,000 level.